New Income Tax Act From April 1, Higher STT On F&O And 20-Year Data Centre Tax Holiday Begin With FY27

New Delhi: India will implement a new income tax law from April 1, 2026. The Income-tax Act, 2025 will replace the old 1961 law. The main aim is to make tax rules simpler, clearer, and easier to understand for taxpayers.

During the transition period, both old and new systems will run together. Returns for AY 2026-27 will still follow the old law, while advance tax from June 2026 will follow the new system.

Single ‘Tax Year’ System Introduced

One major change is the removal of the ‘assessment year’ and ‘previous year’ system. It will now be replaced with a single “tax year”.

Also, taxpayers will be allowed to claim TDS refunds even if they file returns after deadlines, without penalty. This is expected to make compliance easier.

Higher STT on F&O Trading

From April 1, Securities Transaction Tax (STT) on derivatives trading will increase:

Futures: 0.02% → 0.05%

Options premium: 0.1% → 0.15%

Options exercise: 0.125% → 0.15%

The government aims to reduce risky and speculative trading in the F&O segment.

Data shows that over 1.06 crore investors traded in F&O in FY25, but many suffered losses of over ₹1.05 lakh crore. The move is meant to protect small investors.

Relief on Foreign Spending

The government has reduced Tax Collected at Source (TCS):

Overseas tour packages: 20% → 2%

Medical and education remittances under LRS: 5% → 2%

This will reduce the financial burden on middle-class families spending abroad.

Big Boost for Data Centres

A major announcement is a 20-year tax holiday for foreign companies using data centre services in India, valid till 2047.

This ensures that foreign firms will not face tax on global income linked to Indian data centres. It also creates a level playing field whether companies build their own centres or use Indian services.

Support for IT Sector

The safe harbour limit for IT and IT-enabled services has been raised from Rs 300 crore to Rs 2,000 crore.

This will reduce disputes and give more certainty to companies operating in the sector.